YUM! Brands

YUM! Brands is the largest fast-food operator in the world in terms of number of locations, with more than 40,000 outlets in approximately 125 countries. It is second to McDonald's in sales. The company's flagship chains include Kentucky Fried Chicken (KFC), with over 16,200 locations; Pizza Hut, with over 13,200 locations; and Taco Bell, with over 5,800 locations. It also operated the Long John Silver's seafood chain as well as several hundred A&W root beer and burger outlets, but sold them to two separate buyers in late 2011. Approximately 75 percent of the company's outlets are run by franchisees, affiliates, and licensed operators, according to Hoovers.[1]

In the fiscal year ending in December 2014, total revenues were approximately $13.279 billion dollars ($11.32 billion in total sales and $1.96 billion in franchising and license fees and income), and the company had 537,000 employees (about 87 percent part-time).[2]

Matt Lathrop, YUM! Brands' director of government and community affairs, formerly co-chaired the Labor and Business Regulation Subcommittee of ALEC's Commerce, Insurance and Economic Development Task Force. At ALEC's 2011 annual meeting, this subcommittee focused solely on the topic of "Paid Family Medical Leave." At the meeting, attendees were given model bills to override paid sick leave legislation in the states. Wisconsin's 2011 Senate Bill 23, which Republican governor Scott Walker used to overturn paid sick leave legislation in Milwaukee, was the basis for the model legislation.[4]

About ALEC

ALEC is a corporate bill mill. It is not just a lobby or a front group; it is much more powerful than that. Through ALEC, corporations hand state legislators their wishlists to benefit their bottom line. Corporations fund almost all of ALEC's operations. They pay for a seat on ALEC task forces where corporate lobbyists and special interest reps vote with elected officials to approve “model” bills. Learn more at the Center for Media and Democracy's ALECexposed.org, and check out breaking news on our PRWatch.org site.

Labor Issues

Membership in National Restaurant Association

YUM! Brands is a member of the National Restaurant Association (NRA), a restaurant industry trade group that has been a major opponent of campaigns for raising the minimum wage and expanding access to paid sick leave. The NRA has spent tens of millions on federal and state politics, and has ramped up its lobbying efforts since 2008.[5] It has boasted about blocking minimum wage increases, and appears to play a role in maintaining a separate, sub-minimum-wage "tipped worker" tier even in states that have passed minimum wage increases.[6]

While YUM! Brands ended its membership in ALEC in 2012, the NRA appears to still be an ALEC member. ALEC has been a key proponent of preemption laws that would prevent local governments from setting their own higher standards for wages and benefits.

YUM! Brands received a "restaurant neighbor award" from the NRA for its hunger relief program in 2012,[8] but over half of restaurant workers are paid so little that they rely on at least one form of public assistance.[9] (See Public Subsidies section below.)

Opposition to Paid Sick Leave, Despite Calling Flu Outbreak a Risk to Business

According to materials obtained by the Center for Media and Democracy (CMD), paid sick leave was a key topic on the agenda of the 2011 ALEC annual meeting, when YUM! Brands was a prominent ALEC member.[4]

"Paid family medical leave" was the only topic of discussion by the Labor and Business Regulation Subcommittee of the Commerce, Insurance and Economic Development Task Force at the 2011 annual meeting, for instance, according to minutes of the meeting. YUM! Brands co-chaired the subcommittee. Meeting attendees were given complete copies of Wisconsin's 2011 Senate Bill 23 (now Wisconsin Act 16) as a model for state override. They were also handed a target list and map of state and local paid sick leave policies prepared by ALEC member, the National Restaurant Association.

In Wisconsin, the Wisconsin Restaurant Association lobbied for SB 23 to repeal the sick leave ordinance, as did the the Metropolitan Milwaukee Association of Commerce (MMAC), the local branch of the the U.S. Chamber of Commerce, an ALEC member.[4]

Meanwhile, YUM! Brands states in its SEC filing that "[h]ealth concerns arising from outbreaks of viruses or other diseases may have an adverse effect on our business." The document specifically refers to avian flu and H1N1 and notes that some viruses "may be transmitted through human contact, and the risk of contracting viruses could cause employees or guests to avoid gathering in public places, which could adversely affect restaurant guest traffic or the ability to adequately staff restaurants. We could also be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations of restaurants. Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or health risk may affect our business."[2]

The World Health Organization has found that "gaps in paid sick leave result in severe impacts on public health and the economy as recent studies on H1N1 confirmed: In 2009, when the economic crisis and the H1N1 pandemic occurred simultaneously, an alarming number of employees without the possibility of taking paid sick leave days attended work while being sick. This allowed H1N1 to spread into the workplace causing infections of some 7 million co-workers in the USA alone."[10] An estimated 12,469 deaths occurred in the United States in 2009 as a result of H1N1.[11]

Low-Wage Fast Food Work Dubbed "McJobs"

"There's good reason such service-sector positions are called 'McJobs'," wrote Fast Food Nation author Eric Schlosser. His Los Angeles Times piece described California State Proposition 72 as "an initiative that would require large and medium-sized business owners to give health benefits to their workers. ... The fast-food industry is the nation's largest employer of minimum-wage labor. ... Led by McDonald's, the industry has pioneered a workforce that earns low wages, gets little training, receives few benefits and has one of the highest turnover rates of any trade."[12]

Other opponents of Proposition 72 included Burger King, Wendy's, Walgreen, Best Buy, Target, Sears, YUM! Brands, the California Chamber of Commerce, and the California Restaurant Association. The state legislature had already passed a bill in 2003, signed into law by then-Governor Gray Davis, that required larger businesses to offer health care benefits. But fast-food companies, big box retail chains, and their allies spent millions of dollars to rescind the law through the initiative process. In their campaign to overturn the law, the same groups ran television ads relying on "scare tactics, distortions and ... fundamental misrepresentation(s) of Proposition 72," according to Schlosser.[12] Proposition 72 failed.

Divine Investors, a KFC franchise owner in New York state, agreed to pay $375,000 in restitution to settle a suit with the New York Attorney General's office over alleged violations of labor law. The alleged violations "included employees working after clocking out, failing to pay required overtime and not covering the cost of washing employees' uniforms" and more than 700 workers (current and former) could be eligible. The settlement was announced in May 2015.[13]

Animal Welfare Issues

Animal Experts Quit Over KFC's Confidentiality Pact

In May of 2005, two animal welfare experts resigned from YUM! Brands after being asked to sign an agreement barring them from speaking publicly on such issues as animal slaughter. Dr. Temple Grandin and Dr. Ian Duncan stepped down from YUM! Brands' animal welfare committee after being sent an agreement requiring them to refer all media inquiries to KFC corporate headquarters:[14]

"I resigned because there is a document that I can't sign. I feel very strongly that I can talk freely to the press about how the program's working, what's been going on with the program," Dr. Grandin told Reuters.[14]

Dr. Grandin has also worked with McDonald's, Wendy's, and Burger King. She said that she respects confidentiality pertaining to suppliers and pricing information. However, no other company, including KFC, has ever required her to sign an agreement that barred her from speaking to the press:

"Certain things are confidential ... I will not give out pricing information or information about who is supplying chicken where. That type of confidentiality agreement I sign all the time."[14]

She did not specify why committee members were being asked to re-sign the agreement. According to Ms. Warschauer, Dr. Grandin, Dr. Duncan, and another committee member had given KFC a list of recommendations the previous March and added that the company had a "plan of action." Both Dr. Grandin and Dr. Duncan had served on the committee for about three years. According to Dr. Duncan, "The way that I read it, it wouldn't allow me to talk in general terms about animal welfare.... If someone phoned me up and said, 'You are on the KFC animal welfare committee,' I was bound to say 'No comment."'[14]

KFC has been criticized by animal advocates over welfare issues and inhumane slaughter of chickens. In 2004, People for the Ethical Treatment of Animals (PETA) released a video taken from inside a West Virginia chicken processing plant that supplies KFC. Workers were ripping off birds' beaks, spitting tobacco into their mouths and eyes, stomping and kicking them. According to Dr. Duncan, the company "has some way to go.... I've not been happy with the progress that's been made in setting standards."[14]

Dr. Grandin agreed that KFC "needs to be strengthening some things.... Change happens slowly and they have been making some improvements."[14]

In 2004/05, PETA had conducted an undercover investigation in a Tyson Foods slaughterhouse in Heflin, Alabama.[15]

PETA's "Kentucky Fried Cruelty" Campaign

Rev. Al Sharpton on KFC's animal abuse. - PETA - March 2006

A campaign sponsored by PETA called "Kentucky Fried Cruelty" has pressured KFC to drop Tyson Foods as its supplier due to its abusive animal practices and resistance to reforms.[16][17]

Tyson Foods

In separate investigations in 2007, PETA documented Tyson Foods workers urinating in the "live hang" area and on the conveyor belt that carried birds to slaughter. Other alleged abuses included breaking legs and wings, throwing birds against shackles, breaking a chicken's back by beating it on a rail, stabbing birds in the neck, and shackling birds by the neck instead of the legs. The investigation also documented supervisors who were either directly involved with the alleged abuses or refused to enforce animal welfare policies. For example, a supervisor was recorded telling the investigator that ripping the heads off live birds was acceptable. Another allegedly refused to intervene after birds became trapped at the end of the conveyor belt and when birds were cut at the body (instead of the throat). Abuse was documented by PETA at both the Georgia and Tennessee plants.[18]

Tyson is also a major supplier of other fast food chains, including McDonalds.[19]

Menu Labeling

In October 2008, YUM! Brands announced that it would begin posting calorie information beside the product name and price on menu boards at its company-owned restaurants across the country by 2011. Exceptions include drive-thrus, where space is limited, and independently-owned franchise locations, although YUM! said they would be encouraged to follow suit. Senior Vice President Jonathan Blum said, "We're a leader. We hope all restaurants, supermarkets and convenience stores follow our lead."[20]

The action comes at a time when more states and cities are putting in place or are considering requirements for restaurant chains to post consumer nutritional information. McDonald's, Burger King, and Wendy's said they had no immediate plans to expand nutritional labeling to menu boards.

Packaging

A 2010 report by Greenpeace found that KFC was using paper products made from Sinar Mas paper mills fed by illegal logging in Sumatra.[21] Greenpeace has included YUM! Brands as a target in its campaign against deforestation in Indonesia.[22]

Political Influence

Political Contributions

YUM! Brands' PAC reported $129,050 in federal political contributions in the 2014 election, 91 percent to Republicans and 9 percent to Democrats.[23]

Public Subsidies and Tax Avoidance

A 2013 study by researchers at the University of California-Berkeley found that "More than half (52 percent) of the families of front-line fast-food workers are enrolled in one or more public programs, compared to 25 percent of the workforce as a whole," at a cost of "nearly $7 billion" per year. The report notes,

"When employers pay poverty wages, workers must turn to public programs to meet their basic needs. Earned income tax credits, publicly subsidized health insurance, income support and food subsidies allow these working families to bridge the gap between their paychecks and subsistence. This is the public cost of low-wage jobs in America."[27]

The National Employment Law Project estimated in 2013 that YUM! Brands' share of that cost is approximately $648 million per year, in effect a public subsidy for the company. That year, YUM! Brands had $1.59 billion in profits and spent $1.5 billion on dividends and stock buybacks.[9]

Meanwhile, the National Restaurant Association lauded YUM! Brands in 2012 for collecting $85 million over four years for a U.N. hunger relief program and for donating $500 million in food.[8] YUM! Brands also claims to have donated some $764 million in food to "those at risk of hunger in the U.S." over the two decades it has been operating its "Harvest" charity program.[28] The company actively lobbies the federal government on the "Food Donation Tax Deduction" and "Charitable Donation of Food" (see Federal Lobbying above), and Jim Larson, who implemented the "Harvest" program for YUM!, has offered training for businesses in how to maximize usage of tax credits.[29]

YUM! Brands is one of the 39% of Fortune 500 companies that paid zero or less in federal taxes for at least one year between 2008 and 2012. In 2009, YUM! made a profit of $288 million, but thanks to tax credits, tax breaks for stock options, and other maneuvers, the company had an effective tax rate of -23.7%. Over the five year period 2008-2012, YUM! had a profit of $1.8 billion and paid an effective tax rate averaging a mere 13.9%.[30]

Local and State Subsidies

YUM! Brands companies also received at least $43,126 in direct subsidies from local and state governments between 2008 and 2012, including tax credits/rebates and low-cost loans. For example, six Taco Bell restaurants in Oregon received several thousand dollars each in "Business Energy Tax Credits" in 2008.[31]

Personnel

CEO Greg Creed

Greg Creed became YUM! Brands' Chief Executive Officer in January 2015, replacing David Novak. Creed was formerly the head of Taco Bell, which "became an industry leader under" his oversight, according to Bloomberg Business.[32] Creed had also served as COO of YUM! Brands and headed "strategic development for Taco Bell International."[33] Under Creed, YUM! Brands reportedly "plans to invest $10 billion in emerging markets and open more KFC restaurants in Vietnam, India, Pakistan, Indonesia, and Nigeria."[32]